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Baltimore And Its Developers Know They Need Each Other

Baltimore has seen an impressive amount of improvement in recent years to areas like Fells Point, Canton and the Inner Harbor, but most are well aware of just how incomplete its revitalization has been.

Baltimore Mayor Catherine Pugh, speaking at Bisnow's Baltimore State of the Market event on March 29, 2018

“Our transformational work has been in the white neighborhoods in town, and over the 44 years we’ve been here, there has not been a ton of progress in East and West Baltimore,” Cross Street Partners principal Bill Struever said at Bisnow's Baltimore State of the Market event March 29.

Real progress is underway on both ends, with the ultimate goal of stitching East and West Baltimore together, according to Struever. To the east, Cross Street Partners is part of a group tasked with a massive redevelopment of the Perkins Homes, Somerset and Old Town Mall areas. But as with any impoverished area, special concern has to be given to avoid displacing the residents who have lived through the worst times.

“It’s really a social mission, because it would be awful to live in a dilapidated neighborhood for decades, and finally, when the spigot turns on, for it now to be a great neighborhood, you’re no longer there," La Cité Development President Dan Bythewood said.

La Cité is underway on its own sizable development in West Baltimore called Center\West, which will ultimately deliver around 3,000 residential units, 20% of which will be designated as affordable housing. Like in East Baltimore, La Cité will depend on a patchwork of funding from federal, state and local governments, along with nonprofit investment.

“The city supports us in every way that they can," Bythewood said. "We’ve been fine for financing, and when we put a shovel in the ground, our project doubled the amount of [expected] inclusionary housing in the city of Baltimore.”

Baltimore Mayor Catherine Pugh is well aware of the impact developments like Center\West can have, calling it "something unheard of" in her keynote address. Pointing out how cities like Detroit and Cleveland relied on private investment to jump-start recoveries, Pugh committed to doing more to entice such capital sources.

“We’re looking for private investors to look into communities that deserve that kind of investment, but we should also have more skin in the game,” Pugh said.

Wilkes Artis shareholder Eric Kassoff, Beatty Development Group Vice President Tim Pula, Cross Street Partners principal Bill Struever and La Cité Development President Dan Bythewood

Pugh said the city will be launching its own investment vehicle with $50M behind it, with the goal of enticing private partners to join in and multiply the capital and its impact.

“Help us to get to $200M a year, which over the next five years is a $1B investment that can turn our city around,” Pugh said.

Pugh's proposal is another example of what Struever referred to as American cities' increasing self-reliance in the face of the shrinking budget at the Department of Housing and Urban Development.

“You can’t blame it on this administration; the federal government has been taking money away going back to the Reagan administration," Struever said. "They’ve been disappearing from the funding environment. Fortunately, many cities have been investing in projects, and they have [experienced] growth that allows them to self-invest.”

The development team behind the East Baltimore revival plan is still hoping for federal funding not to disappear completely — the group, led by McCormack Baron Salazar and including Beatty Development Group, has applied for a $30M grant from HUD's Choice Neighborhoods Initiative program. Beatty Vice President Tim Pula called the $30M "a drop in the bucket," but emphasized how developers have to scratch and claw for every bit of funding when affordable housing is involved.

“Debt and equity is relatively easy to figure out, but all the different layers of funding from city, state and the federal government are very significant and very difficult to deal with,” Pula said.

M&T Bank Administrative Vice President Chris Beach and Himmelrich Associates President Sam Himmelrich

For residents, the Choice Neighborhood Initiative is a key program — not because of the funds attached, but because projects funded by it are mandated to make a new unit available to every single resident displaced by the redevelopment.

Whether or not East Baltimore will receive the CNI grant, Pula has committed to giving every resident of Perkins Homes and Douglass Homes the opportunity to remain in the area in a new unit. Of the 1,234 units planned, one-third will be deeply affordable, another third will be classified as workforce housing and the final third will be market-rate. 

Transforming the areas in question from universally low-income to mixed-income will be a key element in improving them overall, according to Struever. Nearby "Eds and Meds" insitutions like Johns Hopkins and the University of Maryland-Baltimore  have incentive programs worth thousands of dollars to encourage their employees to work nearby, and new development will likely increase the number that take advantage.

Pugh called for more employers to adopt such programs, noting that Johns Hopkins has had a transformational effect on its surroundings already. Still, there are greater factors at work on which government must take the lead.

“We need to repopulate our city, and create incentives for those passing through Baltimore to think, ‘This is a place I want to live in,’” Pugh said. “We believe that there are two reasons why people don’t want to live in cities: quality of education and crime.”

Himmelrich Associates President Sam Himmelrich, Madison Marquette Managing Director Peter Cole, American Real Estate Partners principal Michael Gribbon and Ballard Spahr partner Jon Laria

To that end, Pugh made two encouraging announcements: For four straight months, violence has decreased in Baltimore City, a total decline of over 30% in every single category. The city is also planning to build 23 new schools in the coming years, not including the City Springs elementary and middle school that will be replaced as part of the East Baltimore project.

"We will build more new schools in Baltimore City than in the entire state of Maryland," Pugh said.

The city's show of results essentially amount to a bet that it is hoping businesses call. With a promise to continue to decrease taxes for the city, Pugh emphasized the need for private help.

“One of the things that I said when I came in as mayor in 2016 was that the city can’t do everything by itself,” Pugh said.

La Cité, Beatty, Cross Street and the other developers attached to neighborhood revitalization projects have answered the call, which Bythewood characterized as doing a public service.

“Since developers control the purse strings, it depends on how much you want to drive into these communities,” Bythewood said. “When developers take a real interest directly in the neighborhood, it creates jobs and can transform the neighborhood.”

La Cité put Bythewood's philosophy into practice with the $80M investment it made into Center\West, but it had help from major national capital sources — a point Bythewood emphasized.

“You guys in Baltimore need to have more faith that growth is coming," Bythewood said. "BlackRock has put money into West Baltimore. Think about that.”

CORRECTION, APRIL 4, 11:40 A.M. ET: A previous version of this article misstated Mayor Catherine Pugh's first name. This article has been updated.